Let the Bidding Begin! Pros See Higher Onyx Offers Ahead

Amgen's allegedly low-ball offer to buy Onyx Pharmaceuticals has set off a potential bidding war that could score much-bigger bucks for the cancer drugmaker while leaving biotech behemoth Amgen looking like a groom left behind at the altar, analysts said Monday.

"Given the scarcity of these kinds of assets ... and the magnitude of the synergies, I think pharma companies around the world are going to look at this and salivate," said Geoffrey Porges, an analyst at Bernstein Research.

Onyx on Sunday confirmed it had received an unsolicited $120-per-share offer from Amgen—a $10 billion deal—which was among other things attracted by Onyx's multiple-myeloma treatment drug Kyprolis. That drug, which began sales last year, could eventually generate annual revenue of as much as $2 billion, analysts have said.

Onyx said it had rejected the bid because "Amgen significantly undervalued Onyx and its prospects."

At the same time, Onyx said it was authorizing its financial advisor Centerview Partners to contact potential buyers.

"We are actively exploring the potential to combine Onyx with another company as an option to create additional value to Onyx shareholders," said Dr. Tony Coles, the chairman and CEO of the South San Francisco-based company.

Coles said Onyx "has tremendous momentum, and with the expansion of our pipeline and two successful product launches, the company and our talented employees have created significant value for Onyx shareholders."

Robyn Karnauskas, a biotech company analyst at Deutsche Bank, on Sunday issued a report on Onyx that labeled the company as a "buy," noting, "We think the potential M&A bid of $120/share is a worst case scenario for Onyx from our analysis."

"I feel like a bid of $140 to $148 makes sense for the company," Karnauskas told CNBC.com.

"Any company going into cancer, having cancer [drugs already] will have synergy here," she said. Karnauskas mentioned Celgene, Johnson & Johnson and Gilead Sciences as companies whose existing presence in the cancer drug space and plans to expand there could lead them to look at Onyx.

And Karnauskas said Amgen might remain a suitor. "In my opinion, it makes sense for Amgen to up their bid because their bid is too low," she said.

And Porges, the Bernstein analyst, said that Onyx could be worth up to $180 per share—50 percent more than Amgen's bid —depending on the buyer.

Onyx would be worth less to some other companies—ones, perhaps, with a less developed sales force in Onyx's key areas—but still much more than what Amgen was initially willing to spend, Porges said.

Ironically, he said, Amgen's bid may have highlighted Onyx's value to other potential buyers while encouraging Onyx to sell itself, undercutting the likelihood that Amgen will be the one walking away with the prize.

"I think Amgen acted somewhat carelessly, where if they had showed up with a dramatic offer that would have substantially valued the synergies and some of the potential value, then they probably would have initiated a friendly transaction," Porges said. "Instead, they may end up driving Onyx into the hands of other suitors who have better matches for Onyx and that have more resources than Amgen."

"If Amgen had shown up with $150 per share they probably could have closed this," he said. "I think there was a certain amount of opportunism on Amgen's part. The market and most of the research coverage would tell you that Amgen's offer doesn't really recognize the potential they would extract from Onyx."